CAPITAL MARKET IN first quarter : Stocks in doldrums despite fervent measures
KATHMANDU, NOV 01 -
It has been a dismal show at the domestic capital market. With the first quarter of the current fiscal year already ending, the bearish run at the capital market refuses to go away. The market value of blue chip companies is still in the lows, and the daily turnover at the Nepal Stock Exchange (Nepse) is on a decline.
All this has happened despite several measures by the government to stop the downturn in the stock market. In order to bring back investor confidence, the government in the current budget reduced the capital gains tax to 5 percent from 10 percent and the central bank took a flexible approach on margin lending.
The government in the last fiscal year had also directed government-owned institutions like the Employees Provident Fund, the Citizens Investment Trust, Nepal Telecom and Rastriya Beema Sansthan to purchase shares on the secondary market in bulk to stabilize the stock market.
A close look at all the stock indicators including market capitalization, the Nepse index and the daily turnover of the last three months shows no optimism on the part of investors.
In the first three months, investors saw their stock value drop by Rs 35.28 billion. Market capitalization (the total value of all the traded stocks) came down to Rs 302.06 billion on Oct 17, the last day of trading in Q1, from Rs 337.35 billion on July 17, the first day of trading.
Market capitalization recorded a high of Rs 338.98 billion on July 20 before slumping to Rs 282.93 billion on Sept 19. However, it recovered slightly to Rs 302.06 billion at quarter-end.
The Nepse index too plunged to 330.99 points on Oct 17 from 378.40 points on July 17, losing 47.41 points over the first three months. The market plunged to a low of 317.36 points on Sept 19 before recovering slightly.
Likewise, the volume of transactions has also decreased continuously over the period. The total volume of transactions which was Rs 1.44 billion in the first month of the quarter decreased to Rs 479 million and Rs 396 respectively in the following months. The transaction volume of all the sub-indices including manufacturing, trading, hydropower, insurance, finance companies, others and development banks went down significantly.
“The capital market’s performance in the first quarter is very important as it is a strong indicator of the market’s behaviour for the rest of the year, and investors observe it keenly,” said Rabindra Bhattarai, a stock analyst. “However, the market performed disappointingly.”
A liquidity crunch in the banking system last year was cited as one of the reasons behind the slowdown in the stock market. Now, despite the liquidity situation having improved considerably, the stock market is still in bearish mode.
Stockbrokers have blamed high interest rates for the sluggish trend in the stock market. “Though banks now have excess liquidity, they have not cut interest rates,” said one stockbroker. “Unless the return from stocks is higher than from bank deposits, investors will not be eager to invest in shares.”
NEPSE INDEX
17-Jul-11 378.40
20-Jul-11 380.23 (Highest)
19-Sep-11 317.36 (Lowest)
17-Oct-11 330.99
MARKET CAP (in Rs million)
17-Jul-11 337354.01
20-Jul-11 338980.08 (Highest)
19-Sep-11 282935.43 (Lowest)
17-Oct-11 302067.20
Source: Kantipur
